Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- The company recorded a 4.1% growth in aftermarket performance, driven by increased sales of door control systems and OE spares.
- Export of services grew by 16%, with service income reaching Rs.107 crores due to increased engineering and related support activities.
- The digital business showed a remarkable growth of 31.9% compared to the previous financial year, supported by enhanced field support and increased customer awareness.
- The company inaugurated an electronic testing lab and design office, enhancing capabilities and accelerating product development.
- The company signed a Memorandum of Understanding with IIT Madras to collaborate on the Mobility and Intelligent Transportation Initiative, focusing on sustainable transport and energy efficiency.
Negative Points
- Overall sales performance was impacted, with a decrease of 3.8% in sales compared to the corresponding quarter of the previous year.
- Export sales of goods dropped by 2.1% due to delays in the fee segment and production slowdowns at major OEM overseas customers.
- Commercial vehicle production above 6 tons registered a degrowth of 3.5% in Q1 FY2024-25.
- The domestic EV bus market saw a significant drop of 63% in the first quarter compared to the same period last year.
- The company faced challenges such as election-related disruptions, rising vehicle costs, higher inventory levels at customers, and model mix considerations.
Q & A Highlights
Q: Can you update on the CE outlook for the Indian market and the export side guidance?
A: We maintain the same guidance for single-digit growth in the Indian market and 15-20% growth in exports. Despite some challenges, we expect improvements as government actions and new projects come into play. (P. Kaniappan, Managing Director)
Q: How will increased freight costs and delivery times impact margins in the upcoming quarter?
A: These factors have been accounted for in our plans. We have realigned our logistics to mitigate impacts on our top line for exports. (P. Kaniappan, Managing Director)
Q: What is driving the improvement in gross margins, and why has employee cost increased?
A: Margin improvements are due to productivity gains, price increases, and raw material cost stabilization. The rise in employee costs is mainly due to increased headcount in R&D, which is offset by higher service revenue. (Unidentified Corporate Speaker)
Q: Could you provide a breakdown of export products and their performance?
A: We faced a demand reduction from BMW but are offsetting this with increased supply of other products like compressors and actuators. New projects with global customers are expected to boost exports. (P. Kaniappan, Managing Director)
Q: What is the demand outlook for domestic EV buses this year?
A: The domestic EV bus market saw a 63% drop in Q1 but is expected to recover as government tenders and programs resume. (P. Kaniappan, Managing Director)
Q: What are the expectations for margins going forward?
A: We aim to progressively improve margins through cost management and customer negotiations, despite market pressures. (Unidentified Corporate Speaker)
Q: Are there any new export opportunities for ZF Group?
A: Most of our sales are to ZF Group locations globally. We act as a manufacturing site, with the parent company handling end-customer relations. (P. Kaniappan, Managing Director)
Q: What new regulations do you expect to be implemented soon?
A: We anticipate regulations for electronic stability control in buses, followed by autonomous emergency braking and lane departure warning systems. ESC could also be extended to trucks. (P. Kaniappan, Managing Director)
Q: What is the revenue from the digital business, and how do you see its growth?
A: Digital business revenue is around INR 80 crores annually, combining hardware sales and subscription revenue. Growth is expected mainly from the aftermarket segment. (P. Kaniappan, Managing Director)
Q: What is the growth outlook for exports and domestic markets this year?
A: We aim to outperform the market by about 10%, driven by new product launches and increased content per vehicle. The market is expected to degrow by 3%, but we plan to offset this with strategic initiatives. (P. Kaniappan, Managing Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
